Meal box firm HelloFresh puts $1.8 billion flotation on menu

FRANKFURT/BERLIN (Reuters) - HelloFresh plans a flotation that could value the German meal kit delivery group at up to 1.5 billion euros (1.34 billion pounds), testing investor appetite after a sharp decline in shares in U.S. rival Blue Apron (APRN.N).

HelloFresh, majority owned by German ecommerce investor Rocket Internet (RKET.DE), dropped a plan to list two years ago after investors rejected a higher valuation.

Its largest market is the United States where it is spending heavily on discount offers and advertising to compete with rivals including Blue Apron and Plated.

Blue Apron joined the stock market in New York in June but its valuation has halved to around $980 million due to rising costs, falling customer numbers and the threat of competition from Amazon (AMZN.O).

Dominik Richter, the 32-year-old co-founder and CEO of HelloFresh, said his loss-making company was on a different trajectory.

“Our margins and our outlook on profitability are quite different. We are gaining a lot of market share in the United States. That is why we assume our listing will turn out differently,” he told Reuters in a telephone interview.

The HelloFresh announcement is a boost for Rocket Internet, which owns a 53 percent stake.

Rocket Internet listed in 2014 with a pledge to be a launch pad for flotations of start-ups, but volatile markets meant it had to wait until this year for its first success with takeaway firm Delivery Hero (DHER.DE), which has seen its shares rise by a quarter since it listed in Frankfurt in June.

Rocket Internet shares were up 1.3 percent at 1200 GMT, having hit their highest level in almost five months.

INTO THE BLACK

HelloFresh is planning to sell new shares worth up to 300 million euros, which would give the new investors a 20 percent stake in the company, according to a person close to the deal, implying a valuation of up to 1.5 billion euros.

That is below the 2 billion euro valuation put on the company last December when it raised funds from asset manager Baillie Gifford and Qatar’s sovereign wealth fund.

HelloFresh, which increased its number of active customers to 1.3 million in the second quarter, said it would use the proceeds to fund growth. It wants to make its service more personalised and add more choice, such as wine and desserts.

While not a direct competitor of HelloFresh, ready meals supplier Bakkavor also announced plans on Tuesday to list, in a deal that sources say could value it at up to 1.5 billion pounds ($2 billion).

HelloFresh, which delivers meal ingredients and recipes in 10 countries, said it expected to break even on an operating level (EBITDA) by early 2019. Its net loss stood at 56.7 million euros in the first half on revenues of 435 million euros.

In August, Blue Apron forecast a second-half net loss of between $121 million and $128 million due to the costs of moving to a new distribution centre, and revenue ranging from $380 million to $400 million.

Richter said HelloFresh would trim losses by reducing marketing costs per customer, saying that was possible now it has built up a loyal following for its range of ingredients paid for by monthly subscription.

HelloFresh spent about 45 euros ($53) per customer on marketing in the second quarter, down from about 54 euros in the first quarter and compared to the $37 Blue Apron spent per customer in the most recent quarter.